Since its inception in the mid-19th century, the oil and gas industry in Romania has long been beneficial to the country. The Romanian oil and gas industry was nationalized soon after the end of World War II, peak production was reached in 1976, and it continued to be managed under the communist regime until 1989.
The responsibility of the government and industry is to ensure the development of these valuable resources leads to a maximum benefit for the country and its people, in a timely, cost-efficient, environmentally protective and safe manner.
In 2018, the Romanian Parliament set the scene for future offshore investments in the Black Sea by passing a bill to regulate offshore legislative framework. Currently, the legislative process is ongoing, and parliament is evaluating some critical provisions at the request of the Romanian President. “Companies who have already invested in the Black Sea also supported the revaluation of the new terms of the framework,” Nadia Crisan, senior vice president of McGuireWoods Consulting’s International Government Relations team, said. “The bill addresses technical and fiscal provisions for offshore oil exploration activities, including exploration permits, local content requirements, transportation conditions and the availability of data. Besides, the bill includes a set of provisions related to royalties and additional taxes. The proposed offshore law seeks to ensure that Romania continues to have a competitive offshore fiscal regime when compared to Europe and the rest of the world for investment.”
The Romanian parliament proposed a revised royalty and additional tax structure for offshore investments, allowing a larger proportion of capital investments to be deducted for calculation of additional tax purposes. Parliament also proposed that almost half of the offshore production be traded on the Romanian market, allowing Romania to establish a trading hub in Eastern Europe for natural gas.
“Currently, several companies operate in the Black Sea, and seven interconnected platforms extract gas and oil from offshore perimeters,” Crisan added. “According to publicly available data, 8 percent of Romania’s oil production is from Black Sea platforms. In addition to current production, the resources discovered and waiting for development could double Romania’s gas production.
“The bill has attracted strong interest from the international community due to existing large investments in the Black Sea from Exxon Mobil, OMV Petrom, Lukoil, Gas Plus SpA and Carlyle International Energy Partners. According to the Black Sea Titleholders Association, over the past 17 years, more than $6.5 billion have been invested in exploration activities alone, and developing production facilities for new projects will involve additional investments of several billion dollars. The first deep-water offshore well was drilled in Romania in 2012. Offshore investors will provide funds to build the entire maritime infrastructure, underwater and onshore, to connect with the National Transportation System.”
Natural gas pipeline
Romania is currently working with Bulgaria, Hungary, and Austria on the BRUA natural gas pipeline, that will create a new export route for future natural gas in the Black Sea. The Romanian section will include 550 kilometers of pipeline, allowing Romania to transport natural gas to Eastern and Western Europe. The project has a total cost of up to 500 million EUR, is co-financed by European funds and is meant to provide energy security for Romania.
According to the European Bank for Reconstruction and Development, Romania’s participation in the BRUA pipeline will allow the country to transform from the country-specific low-pressure system into a high-pressure grid. This would allow access to future major gas infrastructure projects, as well as access to Central European gas hubs. It would also help to service future Black Sea gas sources if discovered.
“The combined development of offshore gas and the BRUA pipeline will make Romania one of the few energy-independent countries in the world, transforming the country into a net natural gas exporter and providing diversity of supply for Eastern Europe,” Crisan says. “Updates on the BRUA pipeline project were presented during the Three Seas Initiative, where the representatives of Transgaz, the operator of the national natural gas transmission system in Romania and the developer of the project, stated that the work is well on track. Construction of the compressor stations began in April, while work on the pipeline corridor itself started in June of this year. Analysts are watching Hungary’s position and the recent statements to pull out of BRUA.”
Date: Oct 29, 2018